South Africa’s largest mobile communications group, Vodacom, which is 50% owned by listed telecommunications giant Telkom, reported a 36,9% growth in net profits to R3-billion for the year ended March.
Revenue over the 12-month period grew by 18,7% to R23,5-billion.
The group’s customer base increased by 29,7% over the year to 11,2-million customers. In South Africa its customer base grew by 23,5% to 9,7-million, with the majority of the growth coming from the prepaid market.
The number of prepaid customers increased by 24,3% to 8,3-million and the number of contract customers increased by 20,2% to 1,4-million.
The strong growth in customers was a direct result of the remarkable number of gross new connections achieved of five million, coupled with low churn in the contract base, offset to some extent by increased churn in the prepaid base, the group said.
“The developing market, through the prepaid service, has been driving market penetration in 2004 and made up 92,4% [2003: 94,3%] of all gross connections.
“Indications are that total Arpu [average revenue per user] has stabilised and during the period under review decreased to R177 per month [2003: R183] due to the continued dilution of Arpu caused by the higher proportion of new, lower prepaid Arpu connections.
“Contract customer Arpu has increased by 0,8% [2003: 12,3%] to R634, while prepaid Arpu remained stable [2003: decreased by 3,2%] at R90 per customer per month,” the group said.
“Due to the high cost of acquisition in a highly developed contract market, Vodacom has implemented upgrade and retention policies over the last couple of years that ensured the decrease in contract churn to the lowest level in our history of 10,1% in 2004 [2003: 11,9%].
“The developing prepaid market, however, is characterised by low acquisition costs due to the flexibility required by this market to be able to access our services as the customer has disposable income.
“The high prepaid churn experienced during the year under review of 41,3% [2003: 34%] is a function of an increasingly competitive market, but also due to changes to the business rules governing prepaid customers.”
Remaining the most dominant player in the South African market, Vodacom said its estimated market share on March 31 was 54%, despite strong competition.
“Although we have been highly successful in defending our market share, this competitiveness of the market had inevitably resulted in margin squeeze,” it noted.
Profit from operations saw a growth of 20,9% to R5,2-billion for the past year, while group Ebitda growth reflected a 15,9% growth to R7,8-billion.
Last week the group — citing a breach of trust — terminated a five-year management contract with Nigeria’s second-largest mobile phone operator, Vee Networks. But for its other African operations it described the last year as an “exciting” one.
Vodacom Tanzania Limited consolidated its position as market leader in that country with a 57% market share at year-end. Vodacom Congo sprl has significantly grown its market share since the relaunch of the operation under the Vodacom brand in May 2002 and has increased its market share from 9% at that time to 47% at year-end. Vodacom Lesotho has positioned itself to capitalise on any future market growth and minimise the impact of competitive activity.
After almost two years of negotiations, Vodacom also finally launched commercial operations in Mozambique on December 15 2003.
“Although still in its infancy, initial indications from this market are promising,” said Vodacom CEO Alan Knott-Craig.
“The number of connections experienced in the three months since launching was ahead of expectations, enabling us to rapidly achieve a 11% market share against an established operator, MCel. Initial Arpu levels are at R110 or $15 per month. All our African operations, except our new Mozambican operation, were profitable at the profit from operations level for the year,” he added.
Vodacom’s revenue from its African operations increased by 21,2% to R1,5-billion. — I-Net Bridge